Foreign investment to boost India construction market

$1.2 billion budget allocated for smart city investment by new prime minister

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Forecasts suggest the $157 billion-worth Indian construction sector will grow at a rate of 8% per annum over the next decade following the election of a new government in the country, which is expected to attract increased foreign investment.

According to a report prepared by PricewaterhouseCoopers (PwC), the removal of barriers to foreign government will “spur demand for construction” over the next 12-18 months in India.

“With a new government having been formed at the centre, with a strong mandate to stimulate economic growth, the outlook for the sector appears positive,” says the PwC report prepared for The Big 5 Construct India Exhibition.

“Demand for real estate has been one of the drivers of construction sector growth over the last 10 years,” the report continues, stating the private housing sector will be a key growth area in the country. “Improvement in economic conditions has the potential to drive demand for real estate, as housing continues to be a favoured investment asset among Indian households.”

An investment of up to $1 trillion is expected into Indian infrastructure by 2017, with heightened investment in industrial projects by the government. In July 2014, newly-elected Indian prime minister Narendra Modi set aside $1.2 billion in the annual national budget for the construction and investment in smart cities.

“Cities in the past were built on river-banks,” Modi said as per The Economic Times. “They are now built along highways. But in future, they will be built based on availability of optical-fibre networks and next-generation infrastructure.”

The total construction market in India for FY2014 (fiscal year ending March 2014) witnessed an increase of $4 billion over FY2013. Infrastructure accounts for 49%, housing and real estate for 42% and industrial projects account for 9% of the market.


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